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  • FIRST POST
    • loofer
    • By loofer 10th Aug 18, 9:45 AM
    • 525Posts
    • 293Thanks
    loofer
    BIK when on cusp of 20%/40% threshold
    • #1
    • 10th Aug 18, 9:45 AM
    BIK when on cusp of 20%/40% threshold 10th Aug 18 at 9:45 AM
    Another BIK thread...

    Hypothetical figures but it'll help me understand better.

    If I have a salary of 46,350, which happens be be the max on the basic 20% threshold what happens if I take a company car with a BIK of say 100 month?

    a) Is it assumed my 'salary' is now 46,350 + 1200, so I pay 40% on the 1200 because it's tipped me into higher rate threshold?

    Or

    b) Is the tax rate of my actual salary used and therefore I pay 20% on the BIK element?

    Or

    c) Some other equation, such as they reduce my PA by 1200? In which case
    New PA =11850-1200=10650
    New PA + Basic threshold = 10650 + 34500=45150
    higher threshold breached by= 46350-45150 = 1200
    ***********************************************
    Although in reality my salary exceeds the basic threshold, I've managed to stay in 20% bracket by using marriage allowance, increasing pension contributions, paying charity through PAYE, buying company shares through salary sacrifice.
Page 1
    • Dazed and confused
    • By Dazed and confused 10th Aug 18, 10:38 AM
    • 2,780 Posts
    • 1,344 Thanks
    Dazed and confused
    • #2
    • 10th Aug 18, 10:38 AM
    • #2
    • 10th Aug 18, 10:38 AM
    The answer is a), the benefit is part of your income so if that takes you 1200 above your higher rate limit then higher rate tax is charged on the 1200.

    But you are mistaken about some of the other things mentioned.

    Your Personal Allowance can only be reduced if your income exceeds 100,000. You may be confusing your Personal Allowance and your tax code.

    If you receive Marriage Allowance it cannot ever keep you in a particular tax band. Marriage Allowance (for the receiver) does not entitle you to any additional allowance, it is simply a tax credit off whatever your tax bill is calculated to be.

    If you are liable to higher rate tax you will lose Marriage Allowance for that year.
    • loofer
    • By loofer 10th Aug 18, 10:51 AM
    • 525 Posts
    • 293 Thanks
    loofer
    • #3
    • 10th Aug 18, 10:51 AM
    • #3
    • 10th Aug 18, 10:51 AM
    The answer is a), the benefit is part of your income so if that takes you 1200 above your higher rate limit then higher rate tax is charged on the 1200.

    But you are mistaken about some of the other things mentioned.

    Your Personal Allowance can only be reduced if your income exceeds 100,000. You may be confusing your Personal Allowance and your tax code.

    If you receive Marriage Allowance it cannot ever keep you in a particular tax band. Marriage Allowance (for the receiver) does not entitle you to any additional allowance, it is simply a tax credit off whatever your tax bill is calculated to be.

    If you are liable to higher rate tax you will lose Marriage Allowance for that year.
    Originally posted by Dazed and confused
    Thanks, I'm sure when you get the letter from gov that tells you your new tax code they show its as PA + MA to give you a new PA, reflected in tax code. Will have to check it next time.
    • Dazed and confused
    • By Dazed and confused 10th Aug 18, 10:56 AM
    • 2,780 Posts
    • 1,344 Thanks
    Dazed and confused
    • #4
    • 10th Aug 18, 10:56 AM
    • #4
    • 10th Aug 18, 10:56 AM
    It does show it like that in your tax code but that simply means you have a higher tax code number. Not a higher Personal Allowance.

    When they review things at the year end know your actual income for the year they will check if you are liable to higher rate tax and remove the Marriage Allowance if so.

    If not they will calculate your liability using the Personal Allowance and deduct 238 (current year figure) off whatever you is due overall for that year.

    For many it won't make any difference but the fact is as the receiver you are not receiving any extra allowances so MA cannot alter your tax band from higher rate to basic rate.
    • loofer
    • By loofer 10th Aug 18, 12:11 PM
    • 525 Posts
    • 293 Thanks
    loofer
    • #5
    • 10th Aug 18, 12:11 PM
    • #5
    • 10th Aug 18, 12:11 PM
    It does show it like that in your tax code but that simply means you have a higher tax code number. Not a higher Personal Allowance.

    When they review things at the year end know your actual income for the year they will check if you are liable to higher rate tax and remove the Marriage Allowance if so.

    If not they will calculate your liability using the Personal Allowance and deduct 238 (current year figure) off whatever you is due overall for that year.

    For many it won't make any difference but the fact is as the receiver you are not receiving any extra allowances so MA cannot alter your tax band from higher rate to basic rate.
    Originally posted by Dazed and confused
    Even the Gov's own website refers to ti as a transfer of personal allowance.
    • Dazed and confused
    • By Dazed and confused 12th Aug 18, 10:38 AM
    • 2,780 Posts
    • 1,344 Thanks
    Dazed and confused
    • #6
    • 12th Aug 18, 10:38 AM
    • #6
    • 12th Aug 18, 10:38 AM
    Low Incomes Tax Reform Group explain it here,

    https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled#toc-what-is-the-marriage-allowance-
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